NBN, streaming foray drag down Telstra profits

Telstra has seen its first-half profit fall by 6 per cent as its sales revenue flatlined and the impact of the NBN and writedown of its video streaming business took its toll.

On an underlying basis – with one-off gains and losses stripped out – profit rose 9.5 per cent to $2 billion.

Importantly, tougher competition saw no growth in topline sales revenue, which remained at $12.8 billion for the half.

As flagged last year, the interim dividend was slashed to 11 cents per share, down from 16 cents.

Telstra announced at its full-year results in August an expected $3 billion earnings blackhole created by the NBN’s erosion of traditional earnings streams, which meant existing dividend policies were unsustainable.

That announcement saw Telstra shares plummet 10 per cent to under $4 on the day, and they have headed further south since.

By the numbers

Solid result

Telstra chief executive Andrew Penn said the company was operating within a significant period of change, including migration to the NBN, competitive challenges, accelerating pace of technological change and preparation for the transition to 5G.

“Within that environment, we are pleased to have delivered a solid result in line with guidance for this half,” Mr Penn said.

Telstra’s fixed-line business continued to struggle, with revenue down 8 per cent, as the NBN roll-out continues, while mobile sales were fairly flat, edging up just 0.8 per cent.

Network Application Services – which includes cloud applications and consulting services – continued to be Telstra’s growth driver, with revenue up 14 per cent to $1.7 billion.

Morgan Stanley’s Andrew McLeod said while earnings were in-line with expectations and Telstra reiterated its guidance for full-year results, including a 22 cent dividend, the negative influence of competition was evident in the numbers.

Nonetheless, investors saw positives in the result with shares up 2 per cent to $3.50 in morning trade.